IMF “expansionary austerity”
The IMF’s latest World Economic Outlook presents the results of its own investigation into various debt-reduction programs undertaken by 33 emerging-market economies and 21 developed economies between 1980 and 2019. “On average,” the authors note, “consolidations do not lead to a statistically significant effect on the debt ratio.”
But it is unclear whether this welcome (albeit late) volte-face will extend beyond the IMF’s research department and how it might affect the Fund’s lending activities. Early indications are not promising.
To be sure, this is hardly a new insight. John Maynard Keynes emphasized it nearly a century ago, and many have reiterated it ever since. It was certainly known to the negotiators who crafted the London Debt Agreement of 1953, which dramatically reduced West Germany’s burden of public debt.
Jayati Ghosh Project Syndicate
In 2013, the International Monetary Fund produced a report acknowledging that it had “underestimated” the effects that austerity would have on Greece’s economy.
The IMF’s bizarre belief in “expansionary austerity” would be laughable if it were not so damaging.
Jayati Ghosh Project Syndicate 14 August 2019
https://englundmacro.blogspot.com/2019/08/in-2013-international-monetary-fund.html
London Debt Agreement of 1953
https://www.networkideas.org/wp-content/uploads/2016/09/Debt_Relief.pdf
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